Sunoco Inc. will be sold to natural gas company Energy Transfer Partners in a deal valued at about $5.3 billion. Sunoco had been looking to exit the refining business prior to the deal.
The acquisition would expand the footprint of the Dallas company in the Northeast, and also diversify its holdings in a shift toward more crude and other heavy hydrocarbons. Natural gas companies have been hammered by plunging prices, which have recently hit 10-year lows.
"This transaction, which will be immediately accretive, represents the next step in Energy Transfer Partners' transformation into a more diversified enterprise with an integrated and expanded footprint," said Chairman and CEO Kelcy Warren. "As we have said in the past year, our goal is to derive more of our distributable cash flow from the transportation of heavier hydrocarbons like crude oil, NGLs, and refined products. With this transaction, we make a major move in that direction."
Energy Transfer Partners said the deal will bring its cash flow mix for its pipeline businesses to about 70 percent natural gas, and 30 percent heavier hydrocarbons. Company officials did not return an immediate call from The Associated Press.
The offer includes $25 in cash and a portion of an Energy Transfer Partners unit totaling $50.13 for each Sunoco share. Sunoco shareholders can also opt for $50 in cash or slightly more than one ETP unit.
The price represents a 29 percent premium to the 20-day average closing price of the Philadelphia company's shares as of Friday. The company's stock closed at $40.91, and the $50.13 per share price represents a 23 percent premium to that.
The deal has been approved by the boards of both companies and is expected to close in the third or fourth quarter of this year. Regulators and shareholders must still sign off.
Sonoco will continue to be based in the Philadelphia area and its previous goal of exiting the refining business is ongoing.
Shares of Sunoco Inc. jumped 22 percent, or $9.05, to $49.96 in premarket trading, which could mean that the stock will be hitting four-year highs when the market opens Monday. Shares of Energy Transfer Partners LP rose 12 cents to $48.04 .